Rise of China as an Economic Power

After 1927, Chiang Kai-shek managed to reunify China and bring in the Nanjing decade, a period of relative prosperity despite civil war and Japanese aggression. In 1937, the Japanese invaded and literally laid China to waste in eight years of war. The era also saw the first boycott of Japanese products. Afterwards, the Chinese civil war further devastated China and led to the fall of the Republic in 1949. * Civil war, famine and turmoil in the early republic The early republic was marked by frequent wars and factional struggles.

From 1911 to 1927, famine, war and change of government was the norm in Chinese politics, with provinces periodically declaring “independence”. The collapse of central authority caused the economic contraction that was in place since Qing to speed up, and was only reversed when Chiang reunified China in 1927 and proclaimed himself its leader. * Development of domestic industries Chinese domestic industries developed rapidly after the downfall of the Manchu Qing dynasty, despite turmoil in Chinese politics.

Development of these industries peaked during World War I, which saw a great increase in demand for Chinese goods, which benefitted China’s industries. In addition, imports to China fell drastically after total war broke out in Europe. For example, China’s textile industry had 482,192 needle machines in 1913, while by 1918 (the end of the war) that number had gone up to 647,570. The number increased even faster to 1,248,282 by 1921. In addition, bread factories went up from 57 to 131. The May 4th movement, in which Chinese students called China’s population to boycott foreign goods, also helped spur development.

Foreign imports fell drastically from 1919–1921 and from 1925 to 1927. Chinese industries continue to develop in the 1930s with the advent of the Nanking decade in the 1930s, when Chiang Kai-shek unified most of the country and brought political stability. China’s industries developed and grew from 1927 to 1931. Though badly hit by the Great Depression from 1931 to 1935 and Japan’s occupation of Manchuria in 1931, industrial output recovered by 1936. By 1936, industrial output had recovered and surpassed its previous peak in 1931 prior to the Great Depression’s effects on China.

This is best shown by the trends in Chinese GDP. In 1932, China’s GDP peaked at 28. 8 billion, before falling to 21. 3 billion by 1934 and recovering to 23. 7 billion by 1935. * The rural economy of the Republic of China The rural economy retained much of the characteristics of the Late Qing. While markets had been forming since the Song and Ming dynasties, Chinese agriculture by the Republic of China was almost completely geared towards producing cash crops for foreign consumption, and was thus subject to the say of the international markets.

Key exports included glue, tea, silk, sugar cane, tobacco, cotton, corn and peanuts. The rural economy was hit hard by the Great Depression of the 1930s, in which an overproduction of agricultural goods lead to massive falling prices for China as well as an increase in foreign imports (as agricultural goods produced in western countries were “dumped” in China). In 1931, imports of rice in China amounted to 21 million bushels compared with 12 million in 1928. Other goods saw even more staggering increases. In 1932, 15 million bushels of grain were imported compared with 900,000 in 1928.

This increased competition lead to a massive decline in Chinese agricultural prices (which were cheaper) and thus the income of rural farmers. In 1932, agricultural prices were 41 percent of 1921 levels. Rural incomes had fallen to 57 percent of 1931 levels by 1934 in some areas * Foreign direct investment in the Republic of China Foreign direct investment in China soared during the Republic of China. Some 1. 5 billion of investment was present in China by the beginning of the 20th century, with Russia, The United Kingdom and Germany being the largest investors.

However, with the outbreak of WWI, investment from Germany and Russia stopped while England and Japan took a leading role. By 1930, foreign investment in China totalled 3. 5 billion, with Japan leading (1. 4 billion) and England at 1 billion. By 1948, however, the capital stock had halted with investment dropping to only 3 billion, with the US and Britain leading. * Currency of the Republic of China The currency of China was initially silver-backed, but the nationalist government seized control of private banks in the notorious banking coup of 1935 and replaced the currency with the Fabi, a fiat currency issued by the ROC.